U.S. Supreme Court Narrows Scope of CERCLA Liability

Brian Burniva July 1, 2009 — 972 views

In a stunning defeat for state governments and the Environmental Protection Agency (EPA), the United States Supreme Court issued a critical opinion on the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). The opinion, published on May 4, interprets the "arranger for disposal" status and application of joint and several liability to all liable parties under CERCLA Sec. 107.

In Burlington Northern and Santa Fe Railway Company, et al. v. United States Environmental Protection Agency, et al., the Court rejected the EPA's expansive interpretation of the CERCLA Sec. 107 (a) (4) "arranger" liability for Shell Oil Company, and rejected the joint and several liability determination for the remaining Potentially Responsible Party (PRP) at the site. As a result, Justice Stevens, writing for an 8-1 majority (J. Ginsburg dissenting), held that the government could not be reimbursed for 91 percent of the remediation costs it had or will expend for remediation of the site.

An "arranger" must intend to dispose for CERCLA Liability to attach.Shell Oil Company was released from all liability under the "plain reading" of CERCLA because the evidence demonstrated that when it sold its chemical products to the site lessee for a useful purpose, some of which were ultimately spilled at the site, the actual transaction was for a legitimate commercial purpose. The transaction was not one whereby Shell "intended" to dispose of the chemical products, although such disposal did in fact occur.

The fact that Shell took steps to advise its customer how to handle and store the chemicals prior to their use was cited as evidence that Shell took all reasonable measures to prevent disposal by the customer. Even though Shell knew that spills of the hazardous chemicals were probable, the Court held that "knowledge alone is insufficient to prove that an entity 'planned for' the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused useful product. In order to qualify as an arranger, Shell must have entered into the sale . . . with the intention that at least a portion of the product be disposed of during the transfer process..." The government was unable to provide evidence of Shell's intent, thus the Court dismissed Shell as a PRP.

If a "reasonable basis" to apportion exists there is no Joint and Several Liability.The Court held that "when there is a reasonable basis for determining the contribution of each cause to a single harm" it is an error to hold the PRPs jointly and severally liable for the whole cost of remediation under CERCLA. In this case, the PRP site owners demonstrated that they owned only 19 percent of the site where releases occurred, that their 19 percent of the site was used only 45 percent of the time (when releases occurred) and that only 10 percent of the releases occurred on that PRP's portion of the site. Although it was impossible to determine the precise contribution coming from the 19 percent of the site owned by the PRPs, the Court found the evidence in the record sufficient to support the District Court's allocation of only 9 percent of the liability to the PRPs. Accordingly, 91 percent of all costs expended by the EPA and the state government could not be recovered and would be borne by the governments performing the cleanup.

The significance of this opinion will have several predictable results. These include:

The EPA will have fewer PRPs to pursue as "arrangers for disposal" without evidence of intent;

Site owners may have an increased share of clean-up costs unless they can demonstrate a "reasonable basis" for apportionment of the clean-up costs;

Brownfields restoration parties who undertake CERCLA cleanups may have fewer PRPs from whom to obtain contribution; and

The EPA will have to reconsider listing sites on the National Priorities List unless it is willing to risk not being able to recover its full costs of remediation at sites, where there is a "reasonable basis" for apportionment of liability among PRPs.